NatLUST provides liquidity using a simple financing technique: Rather than 'lending' money to claimants, NatLUST purchases the O/O's approved claims using a “two-step” payment process. We can pay either the claimant or their consultant.

Step One: Depending on the particular state and their program rules, consultants will use NatLUST's database to create the assignment paperwork either concurrent with the claim being submitted for processing by the state (e.g. MA and VA), or will wait until the state has issued the claim decision (e.g. IL and CT). The assignment form is the legal document through which the claimant sells their claim to NatLUST. NatLUST can send the payments directly to the claimant's consultant if this is desired.

Initial Payment. Immediately upon the state issuing the claim decision, NatLUST will issue an “Initial” payment, typically a large percentage of the amount approved (92% in VA, 90% in CT, etc.). We hold back some amount (e.g. 8% in VA, 10% in CT) from which we will later deduct the accrued carrying costs when the claim is reimbursed.

Step Two: When the claim is eventually reimbursed, NatLUST will receive the reimbursement directly from the UST fund. NatLUST will then remit the holdback, less the accrued carrying costs, in the form of a second and final payment.

WHY THE TWO-STEP PAYMENT PROCESS?

First, because we won’t know precisely how long it will take a LUST fund to reimburse a particular claim (or how short term interest rates may fluctuate), the two–step payment allows NatLUST to retain a percentage of the approved claim as “excess collateral” from which the accrued carrying costs will later be deducted. This allows NatLUST to focus on the credit risk of the UST fund and eliminates the need to look to the owner/operator or consultant as a source of repayment. This makes the program simple and inexpensive to manage.

The two-step payment method is more desirable for a nonprofit program than a single payment, where NatLUST would have to guess at its future carrying costs. With a single payment, likely what would happen is NatLUST would either make a windfall profit (or lose money), neither of which would be a desirable outcome. With the two-step payment model, only the exact carrying costs are deducted, with any excess collateral returned to the RP or their consultant once the claim has been reimbursed.

NatLUST FINANCING IS NOT DEBT TO THE RP OR THEIR CONSULTANT

Because NatLUST is buying a paper asset and not technically lending money, one advantage is that the financing is not debt to the RP, their environmental consultant, the state UST fund or the state's taxpayers. The only party going into debt is NatLUST.

For other questions, visit the FAQ page by clicking here. For a diagram of cash flows, click here.